Getting Financial Freedom by 35!

No we aren’t making any more. In fact, the hubby is working less now that I have two kids at home driving me nuts. So its time to revamp our budget and make some new goals. Having a baby is a money drain, and while we aren’t going to have any debt after it, it did take some money as an investment to get this.

You know how you can be doing really great financially, then life gives you a challenge. That has happened to us. In a few ways.

The budget is so far gone, its not even funny. We should be on track by the end of next month though. In July we went over budget by at least $1900. Yes, FOUR digits. Not even barely four digits. Well into the four digit numbers.

We found out we were pregnant, had a surprise you pay your own tuition moment, and increased some of our expenditures (like travel to school) all in one month. Plus we bought plane tickets for Thanksgiving weekend to visit Daniel’s family. This was something that we knew was going to happen, and I found a great deal online ($420 for both tickets, child in lap including fees). We also lucked out because last week they added more flights and changed flight times so we got better seats and flights. Can we say nonstop from Orlando to Kansas City on the Saturday after Thanksgiving? Oh yeah! Those tickets would have cost us $350 a person, one way! Sometimes amongst the financial drizzle, hope shines on. I mean, we are leaving the next morning, so my husband can go to his evening class and work a full day the Monday before we leave. We have a super short layover in Atlanta on the way down, and we will actually be getting more time with his family this way.

Anyway, between the tuition and the plane tickets we put almost two thousand dollars on the credit card. Which is due after our first paycheck in September. The husband is working as much overtime as he can handle while going to school full time and having a cub scout troop. We haven’t paid extra toward any debt either. We are handling this pretty well considering. Of course its rather scary to look at our bank account and say “hi $300. I am glad you are here, where are your 700 friends that should be here too?” At least this financial crunch has motivated my husband to not only have a thousand dollar cushion in our bank account, but also to open a separate savings account to have a thousand dollars in. Obviously, the goal is $1000, and it might get to be much higher than that, but having $1000 easily accessed in the case of a financially down month will be a great asset. My real goal is to get a years worth of at least mortgage payments and insurance put away. Its a lot easier to find money to cover things like gas for the car and utilities when we have the larger monthly expenditures covered.

Now, I just need to stop nesting. All this, plan and buy things for several months worth of meals before I get too huge and pregnant or we have the kiddo idea can get a little crazy. I know its silly to be really concerned about things like trash bags and toilet paper, but I just hope that I will recover faster and do better adding a second child to the mix than adding the first. Part of that recovering faster = lots of super simple meals planned ahead. That means I will cook and freeze some meals as well as having lots of meals from a can like soup or Hawaiian haystacks. I haven’t had Hawaiian haystacks in SO long. That’s a meal we should probably try out before planning on the menu. Especially if we end up planning it multiple times. I also did some good though. We are assuming we are having a boy this time around. (it will be confirmed in 4 weeks) I have clothing (except for a super tiny coat) for a boy that will get us by until he outgrows 18 months. Most of it came from the daughter’s wardrobe, but I have spent around $15 at yard sales buying a bit of wintery things for 0-6 months. Besides, if we end up with a boy wearing a newborn sized white snowsuit with embroidered flowers, I don’t care. He will at least have blue and green underneath and neutral colored blankets.

So, I rambled. Sorry guys. Anyway, long story short, we are still doing ok. I have been making do with the 6 items of maternity clothing I have (until next month at least). I even turned some old, out of syle jeans into maternity jeans. It worked ok, except that the jeans were rather high waisted to begin with, so I don’t think they fit under the belly as well as they should. Again, rambling!

Next month, I hope to report that we paid off the school expenses and have a balance on the credit card of about $300 for gas and groceries. Maybe we will also cash out our reards then. I have already bought some Christmas presents (i.e. gift cards) using reward points. The less money we have to actually spend, the better.

Can I afford the closing costs? Closing costs can be rather significant. They tend to be at least a couple of thousand dollars. In a recent email from my mortgage company, they estimated $2800 in closing costs. That may not be much to many people, but that is more than 4 times our current monthly house payment (including our escrow account).

Can I afford the additional monthly payment? Often, refinancing to a shorter term mortgage will increase your monthly payment. It may increase by $20 or $200. In some situations your monthly payment may decrease, though that often means an increase in the life of your loan. The problem with adding additional months or years to your mortgage is that you will be getting less equity every month.

Do I have the dedication/will/funds to pay extra toward my mortgage every month without refinancing? This is a huge factor. If you or your spouse lose a job your income is obviously less than it used to be. If making your mortgage payment at all is difficult, you should really consider refinancing to a lower monthly payment, not increasing. If you can find an additional $50, $100, or $200 a month to pay toward your current mortgage and have the will and dedication to continue that route you do not need to pay the bank to change the terms of your loan. Note: if you have a mortgage that has a penalty for paying ahead, this is not really an option.

How much will this decrease my interest? This question relates to how high your current mortgage rate is. If you have a 7% interest rate, or 8% or 9% its very likely that a refinance will save you money. I have heard that a general rule of thumb to remember before considering a refinance is the new interest rate. If the refinance will not decrease your interest rate by 1% or more, it will most likely not benefit you.

So are we going to refinance? Signs point to no. You see, it will decrease our interest rate by less than a percent, cost us closing costs that we would have to put on our HELOC which has an adjustable APR, and would cost us $100 more a month. It makes more sense for us to continue our current plan (double paying the mortgage).

Sure we haven’t double paid every month, but this allows us the flexability to have an extra $600 on months when we have a baby, need a car repair, travel to visit family for the holidays, or anything else that life throws us. Life doesn’t throw us these things all that often so we typically pay extra toward our mortgage. Other people may have a more tumultous life that doesn’t allow them the benefit of dedicating that large additional payment most of the time, but for us this works. Sure we don’t expect to have our home paid off in 6 years, but with this plan, we will likely have it paid off in 10. You know, assuming we don’t move before then.

You know, living with roommates and living with family is totally different. I started gaining true independence after a few years of living with roommates.

I got a basic credit card for textbook purchases, that I paid off as soon as the payment posted on my bank account. I was a little anal, its true. But that way, I know I wouldn’t forget about the purchase, and I wouldn’t pay any fees. It was simple and it worked for me.

I never bought groceries or gas with the credit card. In fact, I rarely used it at all, aside from online purchases. Sure I bought a box of vintage clip on earrings for my roommate’s birthday, and I even made a somewhat impulse purchase of a PS2, but I never bought something I knew I could not pay for immediately from my bank account.

Times changed, my roommate was graduating and I had a semester left in school. Leases tended to run for an entire year though, so I wouldn’t be able to stay in my apartment. An older lady from work offered to let me live in her basement. I didn’t know what else to do, and I didn’t want to be caught up in a lease, so it seemed like the best solution.

Then one day I was driving the missionaries to an appointment and a huge truck turned into me trying to make a left from the right hand lane. My little car was totaled.

I had never had that happen before.

The insurance company that ‘bought’ it, sort of cheated me. I didn’t really understand at the time. I was young and naive. They put the mileage down as a much higher number than it had. I also didn’t realize that the new tires, tailpipe andmuffler I had replaced in the last few months should have been reimbursed.

I bought the roommates old junker. And let me tell you it was a junker. At first I just drove it. The tires were totally bald, and when 2 of them went flat when I was in class one day, I replaced them all. I ended up giving her a couple of hundred dollars so she could pay off the title loan she had on the car, and it was mine. Every bit of the oil burning, strange clunking, pulling the wheel to one side, all with no AC. But, lets be honest, you cannot buy a used car in decent condition for less than $1000. The insurance had only given me $1200 so I didn’t have many options. Even though the car has many problems, and was 2 years older than the car I had before. It was what I could afford.

For the next four months I lived in that basement. Occasionally paying her overdue electric bill, cleaning up after the poo filled bunny, and washing her nasty moldy food left in the plates dishes. (That was one thing I never understood, why did she leave, and let the kids leave food in the plates.) I would go home, or away for a 3 day weekend and come back to horrific smells. It didn’t help that the bunny’s cage, which was also filled with poo, was right next to the sink. Lets just say, I gagged often.

Then I met a boy. Roommate was pressuring me to move out (though the semester was not over), and the boy and I decided it was fast, but it was right so we were going to get married.

That’s when things became hard with the roommate. She thought I had lied to her about this boy (totally not true). She was probably also jealous that she was overweight and 40, had an 11 year old half black and blind son, and had never even been engaged. She said some things that really hurt me.

I moved out as quickly as I could. We were officially engaged for just under a month, and found an apartment for a couple of weeks before the wedding. Of course, before I had everything out, she wanted my keys out, and I was so hurt by the things she had said, I don’t know why she thought i wanted to come get the rest of my stuff at a time when she was home. So a few days after the wedding, I sent my new husband by to get it.

It was hard woking where we did. Here I was, in my early 20s and her supervisor. I had to maintain a professional relationship while trying to avoid her so I wouldn’t cry. It was really hard. It was hard to know if I should quit or not. It was a good job. It would be hard to find another that would work with my school schedule, and pay $9.00 an hour (a bigger deal at that time than now days). I had earned the higher wage too.

So life continued, work was stressful, home was pretty relaxed. It was sort of unusual thatwe got along so well as a married couple. Sure things like squeezing the toothpaste in the middle or toilet seats left up were issues, but there was nothing too bad. The hardest part was probably the strange dietary choices my new husband made. He ate his spaghetti with only grated cheese, no tomato sauce. Macaroni and cheese in a box was one of his all time faves, and we ate a lot of white wonder bread (off brand of course). He also ate an unusual amount of ice cream. Lets just say, the biggest change was food. Though personalities and feelings were hurt and words misunderstood (that was mostly me doing the hurting). But financially we were fine with my sort of good paying fast food job, and his temp work that would last a couple of months, take a week or so off, start a new project. It was fine for our life at the time.

Here I was, 18 years old, one semester of college under my belt and kicked out of my home. My only friends were either still in high school or living in the dorms. But I couldn’t afford the dorms. I didn’t want to move in the middle of the semester to a place where people get matching bedspreads and pillowcases, lived and bathed with strangers, and worse had to eat in the campus cafeteria. When I was in high school I worked in that place. I didn’t ever want to go back. It was an ok job, but it wasn’t somewhere I wanted to be. Partly because I worked there at the same time as my mother. That’s how I got the job. And that’s another story, but lets just say it was a season of my life, and I had moved on to a job paying more than minimum wage.

So I had to look into options. My mother suggested a local house that rented out rooms to women. She lived there when she was 18 and moved to tiny town for school and work. It was more common for women to live in coop style houses in the 70s, but the place was still open and my aunt even still lived there at the time. The best thing, it was income based.

Based on my 2 days a week work schedule I could have a room for $90 a month. I would have to do certain chores around the house, and I had an assigned cupboard and refridgerator. It seemed better than home. Even with tubs only in the bathroom. It was quiet, it was private, and best thing, there wasn’t a curfew. Not that I stayed out late or was crazy. In fact it was years before I even considered stepping into a club again. That was in a different town, with a different set of friends and at a much later time of day even.

I finished up my semester living there. Most of the people living there were older. Women who had family in smaller towns and would travel home for the weekend. The only person close to my age moved in not long after me. Her roommate had kicked her out, and this girl was totally different than me. She was a little older and FAR more experienced in the world. She talked about drinking and sex like everyone did them. She even convinced me that someone was stealing food from me.

I am almost positive that it was her stealing the food. My only response to her saying that was “Well, they must have been hungry.” I think it was a few packs of Ramen noodles that were taken. It might have been twenty cents worth of food. It wasn’t that big of a deal to me. Living on my own, food seemed to go really far. Living at home with 6 other people, you couldn’t buy something and expect to keep it for yourself. Food was communal.

She also convinced me to make a dumb financial decision. I moved to a bigger, and more expensive room with outside access. It was ten or twenty dollars more a month. Really not a huge deal, but still. It was a sign that I could be influenced by others easily. It also gave her easy access to my things. I don’t really know what all she took of mine, but it started driving me nuts. I talked with the house manager. I told her about everything. I decided to move home for the summer. My parents had calmed down. My mother missed seeing me all the time, and I was going to try living at home for the summer while working. I hada friend from a class that I talked with about becoming roommates in the fall, but no real set plans. Plus, my good friend (the one I had gone to the dance club with) was moving into apartments right by my parents house. I could always escape to her place.

Some people have it made. Their parents save money to help finance their education. They ‘go away’ to college leaving their childhood behind in one neat package.

When you live at home while going to school things are different. Wall, actually they aren’t. Its almost the same as high school. Except suddenly you have friends that want to go do things that weren’t allowed as a youngster. Like go to clubs.

I am a total homebody. But, sometimes when friend says it will be fun, and its for a birthday, you decide sure lets go to clubs. None of us will be drinking, and we will go early enough that it will be pretty tame. Right?

Wrong. Don’t get me wrong, the club was fine. There was one couple that needed a room, and the place was sort of stinky, and dirty. But it was fine. We danced, we laughed, and we enjoyed ourselves. I was home around midnight. (Honestly, midnight isn’t that late, but remember its different when you live at home).

My father met me at the door and accused me of smoking. I don’t know why he would think I started smoking, I had never tried it before and didn’t even know many people who smoked. Sure I smelled like smoke, but this was the day before smoking bans in public places. Even going to the bowling alley would result in the stench of the fag.

I was angry. It was the beginning of my second semester of college. My parents were telling me I was kicked out of the house, and I didn’t even have a chance to explain anything. Saying I was at a club was the worst thing i could have said. It was as if I said “I decided to become a crack whore tonight. I now smoke, drink illegally, and am a slut whore. You have failed as parents.” I didn’t have any other option. I was an ‘adult’ and living there by their good graces. I had to get out.

I found myself the next morning looking into life options. I had a barely part time job that gave me minimal spending money, no savings, and no rental history. I was broke and young, a combination that is usually not to your advantage in situations like this.

My mother tried to tell me to move into the dorms. In the middle of the semester. Getting a student loan to pay for it. My father wasn’t talking to me. And here I was. Eighteen with no car for transportation, no friends houses, not even a cell phone (then again that was before everyone had cellphones). I didn’t have any way to get away from it all.

Want to know what happened? Stay tuned for part 3: house hunting and roommates.

I know this is a special topic for many people. Everyone has their opinion as well as experiences that influence their choices. I will share a bit about my history, and how it has influenced me.

Growing up, we were poor. Poor enough, that we always had free meals at school and even got food from the local food pantry occasionally. We also ate the weird cuts of meat since there was a local butcher in our tiny town, and he would sell the meat very cheap. Then there were the times we were given half a deer, or cow or whatever just because people had extra.

Even though we were poor, I never really noticed. Sure I knew other kids had nicer clothes and shoes without holes in them, but I would wear my shoes without really caring, hiding my self behind a wall of bangs, or silence. Its a lot easier to be ignore d by people when you don’t talk to them.

As I got older, my mother decided to continue her education. My mother was never dumb, but taking on school full time with 5 kids 10 and under is a bit daunting. My youngest brother was the first and only one of us to go to daycare. The daycare was paid for by some program at the local university. Yet another thing that we were poor enough to qualify for.

I remember getting special permission to rent “Stanley and Iris” for my mother. She watched it many times for some paper she was writing for school. I don’t even know how she decided on that movie. I personally thought it was horribly boring, plus it had swearing. How could she watch that? Ironically several years later when I began college we had to write a paper on a movie, a critique I believe. I choose a movie I was familiar with, and owned. I only watched it once, and then completed the paper. I am not trying to put down my mother, that is just the facts. For all I know, her class was given a list of movies and she choose Stanley and Iris randomly. Or it was assigned. Who knows.

Anyway, college proved to be really difficult for my mother. Learning Spanish after the age of 40 as well as taking on school full time is hard.

This was also when my parents started getting in debt.

You see, student loans, while they are considered “good debt” can be very tempting. You get money and you don’t have to start paying it back or paying interest until after you are done with school? Sweet! Graduation seems far off, and if your scholarships and other funds only cover tuition, you need money for the books.

I don’t remember the exact reason why my mother stopped going to school. I think it was a combination of the stress and the fact that she had all sorts of kids running around.

After she stopped, she took a CNA course, and started working. The debtor will always get his dues. With no experience in the health care industry for almost a dozen years, and no recent work history, my mother got the pick of jobs. Overnights in the local nursing home. I don’t know if this nursing home was corrupt, or good. I do know that my mother didn’t do so well working nights. She would come home and all of us children would be there, just waking up. Needing rides here and there. That summer my mother got into 4 car accidents. That cost money of course.

I remember the summer we found out the house we had been renting was sold. It was going to be tore down for new apartments. My parents began looking into buying a place. They found a smaller home that was honestly dirt cheap. It needed work, but it was livable, and since it would cost them $200 less per month than renting it seemed like a good thing. It was pretty cramped living in a 2+ bedroom home with 7 people. Sure the attic had been converted into an efficiency apartment, but it was still close quarters.

I was 15, almost 16 at the time. My parents bought it saying that in 2 years my twin and I would be graduated from high school and move out. Then the house would be a good size. Imagine that. I got an eviction notice at the age of 15. Sure I had 2 years, and it seemed really far off, but hearing those comments doesn’t make you feel welcome and loved.

Also, even though my parents house payment was lower than the previous rent, the utilities were higher. My mother got a job as a school bus driver, and after a couple of accidents, she was given a job as a bus para. Pretty much, she entertained the little kiddies, and helped out with the handicapped bus. She could have this fantasy life where scores of preschoolers would love the bus lady. She could also use her (minimal) Spanish skills and talk with them. Lets face it, most kids that are entering school and come from immigrant families speak their native tongue at home. The knew little English, and the fact that she tried to speak some Spanish was exciting. I grew to hate all things yellow and school bus related. But I digress.

Even when I graduated high school and decided to go to the local state university, my parents encouraged me to live in the dorms. For some reason sharing a room with my sisters seemed far better than a slightly larger room with 3 other people. Plus, living in the dorms was pricey they cost much more than my tuition. It was far cheaper to live at home and walk the 2 blocks to campus. I made the smarter financial choice as a senior in high school and choose to give up some independence and live at home.

Things don’t always turn out how we plan them though…

(Keep an eye out for Part 2 of the Why I want to be debt free. Lets just say my financial education was no where near complete.)